In 2000, European leaders ostentatiously set out in their Lisbon declaration to become the most competitive knowledge-based economy in the world by 2010. Four years into the decade, much of Europe remains stagnant and suffers from high unemployment. These two volumes set out to explain the European condition and to lay out the steps necessary to raise Europe's output and productivity. The Sapir Report was produced by a team of distinguished European economists at the request of the European Commission (EC), the executive body of the European Union. It pulls no punches in characterizing Europe's lack of economic dynamism, especially on the continent. Not surprisingly, given its sponsorship, it focuses on actions the EC should take to improve Europe's economic prospects. It argues that greater attention and resources should go into applied research and education, both necessarily long term in their effects. The additional funds should be taken from the richly supported agricultural sector.
Baily and Kirkegaard provide an excellent review of the academic literature on productivity comparisons between Europe and the United States and of interpretations of what has been happening in the United States. This typically top-down approach is supplemented by drawing on sector-level case studies, such as those undertaken by the McKinsey Global Institute, to discover specific obstacles to the adoption of best practices. They include an impressive list of recommended changes, mainly at the country or local level, ranging from relaxing land-use restrictions to raising the EU's inflation target if Europe wants to improve its economic performance and have any chance of realizing the commitments governments long ago made to their now-aging citizens.
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